Porter’s Five Forces Analysis 

I. Executive Summary 
The industry of wine in New York has started in the late 1600s. New York was the first
state in America to receive the first-ever licensed to operate winery business, that is why it is
considered to be the oldest operating winery in America today. The state of New York is the
wine capital of the eastern part of the United States, which is known for its traditional native
American varieties of wine made from Concord grapes. In the late 1950s, Dr. Konstantin Frank a
Ukrainian-born wine enthusiast began experimenting with a higher-quality
European vinifera grape that is found in the Finger Lakes region.  
Although Concord and French American hybrids continue to be the source of most of the
wine in New York, an exponential increase of wine merchants happened when the New York
government passed a legislation called the New York Farm Winery Act of 1976. It is a law that
allows grape growers in New York to build wineries and sell directly to the public, which then
encourages more suppliers and merchants to enter the wine industry in the state. New York hosts
over 240 wineries, making it the fourth largest in the country. It is also home to the single largest
wine company in the world, Constellation Brands.  
With the current state of the industry in New York, the group decided to conduct an
analysis—Porter's Five Forces, to know if the well-known Coconut Wine in the Philippines has
the chance to compete and be profitable in the very sophisticated wine industry in New York. In
the the Threat of New Entrants, the group recognized that there is a medium force of competition
associated with the new entrants in the industry. The high force from the new entrants is due to
some legislation, policies, capital requirement, etc. within the state of New York, that gave the
entrants the power to greatly influence the competition within the market. In terms of the Threat
of Substitutes, a high risk happens when there are numerous substitute products for the main
products and they are cheaper than the industry product, are equal or superior to industry product
quality, and their market performance is equal or superior to the main product’s performance. As
for the Intensity of Rivalry Among Established Firms, there is a high force of competition due
to the great impact of intensifying rivalry factors such as the huge size and number of its
competitors. Moreover, about the buyers’ bargaining power, the group analyzed that the coconut
wine business will face a high force. The legislation resulted in a low switching cost, the wine
industry distribution indicates that there are many providers in the state and the high availability
of substitutes adds to the high force of the buyers’ bargaining power. Last but not least, as for the
bargaining power of suppliers the group realized that there is a strong force for suppliers due to
certain factors that affect them, some of them are the natural and man-made calamities, rivalry
and alternatives for the commodity manufactured and pest outbreak, thereby contributing to the
high strength of the bargaining power from the suppliers. 

II. Porter's Five Forces Strategy Analysis 

       A. Threat of Substitutes (HIGH FORCE) 
Coconut wine, dubbed as the Philippine Vodka, is a liquor extracted from coconut sap
with an alcohol content of 40% to 45% by volume. Despite being a popular drink during social
gatherings and events on rural areas in the Philippines, it does not guarantee that it will receive
the same amount of support in the new place of business.
Furthermore, last December 23, 2019, 11 people have died and 265 were hospitalized in
Laguna and Quezon province due to methanol poisoning after drinking coconut wine during a
Christmas party (Lim, 2019). Because of this, there is a high possibility that the market would
choose other alternative beverages over coconut wine which they are unfamiliar with. Among
these are: 
1. Red and White wines 
These two are probably the closest substitute to coconut wine. The state of New York is
the third biggest buyer of wine, consuming over 67,598 gallons in 2016 (VinePair, 2019).
Generally, the wine industry in New York is generating over $6.65 billion in economic aids to
the state annually (Underhill, 2015). Some of the most popular wine brands in the United States
are Barefoot, Sutter Home, Woodbridge by Robert Mondavi, and Black Box (Conway, 2019).
However, they can be quite expensive compared to other beverages. 
2. Spirits 
This alcoholic beverage is distilled and has an alcohol by volume (ABV) of around 20%
to as high as 80% or 90%. Vodka, gin, tequila, rum, and whiskey are examples of spirits
(VinePair, 2017). Additionally, New Yorkers consumed 31,431 gallons of spirits in 2016 (Sim
& Watling, 2018). Some of the most-purchased whiskey brands are Jameson, Jack Daniel’s,
Crown Royal, Bulleit, and Maker’s Mark (Ngo, 2017). 
3. Beer 
It is aforementioned that coconut wine is often drank during special occasions, but it has
encountered a rival—and that is beer. Beer is deemed to be the most popular drink for Americans
because it is a versatile choice when it comes to social events. In fact, Americans prefer beer
over wine and liquor. According to a 2017 Gallup poll, 40% of the respondents chose beer,
against 30% for wine and 26% for liquor (Mifsud, 2018). This is considered as the go to drink of
Americans especially during sport events. Moreover, New Yorkers consumed 332,576 gallons of
beer in 2016 which is way too many comparing to liquors (Sim & Watling, 2018). The most-
bought beers are Bud Light, Corona, Miller, Coors, and Budweiser (Ngo, 2017). 
4. Juice 
Some people may not be a fan of any beverage that has alcohol content but want
something that is not as plain as water. So, their last resort is drinking juice which comes in a
variety of flavors. 
5. Carbonated drinks or soft drinks 
Aside from juice, soft drinks have been the go-to drink of non-alcoholic consumers. It has
been found out that 61% of adults in New York regularly consume sugar-sweetened soft drinks;
22% of adults and 25% of adolescents report an intake of at least one can or bottle per day of soft
drinks (New York State Public Health Association, 2014). 
With the given data above, the threat of substitutes has a high risk because there are too
many substitutes that are of superior quality and are very much popular in United States. Even if
the price of coconut wine is cheaper than some of the alternatives, this does not mean that
customers will surely buy the main product.
Considering that there had been an issue regarding the poisoning caused by coconut wine,
the market will have doubts in buying the beverage. Additionally, the performance of the
substitute in generating sales for their corresponding manufacturers are superior to industry
product performance. Thus, having a higher risk for threat of substitutes will lead to less profit
potential of the business. 
    
B. Competitive Rivalry in the Industry (HIGH FORCE) 
Competitive rivalry among established firms examines how intense the competition is in
the marketplace by considering the number and strength of its competitors. Analyzing different
factors under this component shows that the coconut wine business will be facing a high force of
competition in New York, U.S.A. 
1. Number of competitors. According to a study about the 2019 economic impact of New
York Wine & Grape Industries conducted by John Dunham & Associates, there are 471
active wineries in New York state (McKee, 2020). New York ranks fourth in the nation for
number of wineries and third in the U.S. in wine production and number of distilleries
(Fleming, 2020). 
2. Product differentiation. No coconut wines available in New York could serve as an
advantage for the business to distinguish its product from the competition because of its
unique taste and raw materials used. 
3. Growth Industry. Taken from the same study mentioned above, New York wine
industry produced 62,450 jobs and had a direct economic impact of $5.53 billion last 2017
which increased to 71,950 jobs and an economic impact of $6.65 billion in 2019. No study in
the current year has been released yet. 
4. Sizes of the coconut wine’s close competitors. Wine and grape businesses are mostly
owned by small, family-owned companies (Cazentre, 2020). However, there
are other large widely known wine distributors in New York such as Decanto wines, Cognac
One, and Soilair. 
5. Monopolistic industry structure. According to Sam Filler, the director of New York
Wine & Grape Foundation, New York’s wine and grape business remains mostly under the
control of small, family-owned producers. Only 37% of the wine produced in New York is
sold through wholesalers, while majority are sold directly by the wineries in their tasting
rooms or is distributed by the wineries to local stores or restaurants. (Cazentre, 2020). 
6. Price War. It is a competitive exchange among rival companies characterized
by lowering the price of their products in their attempt to undercut one another and
gain greater market share. Price wars most often strike industries that offer several
comparable products, but it is not prevalent in the case of New York’s massive wine
industry. Some wines are sold for $25 while others are sold for $150. This price discrepancy
is due to different factors such as the wine experts and micro-regions which produce grapes
with higher quality – along with a higher price tag. (Famiglia Cecchi, n.d.). Price also plays
 into the perception of value – the higher the price, the better the quality (Hesser, 2003).
Hence, price competition seldom takes place.  
To conclude, factors that minimize the intensity of competition such as the increased
growth of industry, advantage of easily differentiating the product due to its unique taste and
ingredient, and seldom occurrence of price war do not outweigh the components that increase
the competition such as the large number and size of competitors and the ability of the
companies to attract customers with aggressive price cuts. Hence, the competitive rivalry is high
or intense. 
   
 C. Bargaining Power of Buyers (HIGH FORCE) 
This section of Porter’s five forces is also described as the market of outputs and refers
to how decisions affect a business. The analysis indicates that the Coconut wine of the
Philippines entering the industry of New York will be confronted with a high force of buyers’
bargaining power.  
1. One of the external factors that strengthens the bargaining power of the buyers is the
availability to substitutes. In this case, it is a high force which reflects that the buyers have
the choice to choose the substitutes like soda and other wines or beverage mentioned
above, rather than coconut wine.  
2. There are three tiers of wine industry in New York - manufacturing, wholesalers, and
retailers. Wholesalers and the wineries on the said state can sell and distribute to retailers,
however, the latter can sell directly to the buyers through
shipping it or in restaurants (Dunham, J. & Associates, 2019). Therefore,
it resulted to many providers which reflects that the buyers can choose to purchase
from other wine brands rather than the coconut wine. 
3. In relation to the legislation (New York Farm Winery Act of 1976), it resulted to low
switching costs wherein it indicates a high force, therefore, buyers or customers can easily
shift from Coconut wine to other brands or wines and can easily impose their demands. 
In conclusion, the analysis of Coconut wine business entering the state of New York,
USA indicates that it will face a high force of buyers’ bargaining power. This is because the
external factors such as the availability of substitutes and low switching costs strengthens the
bargaining power of the buyers. Thus, the legislation of the state which is the New York Farm
Winery Act of 1976, contributes in having a high force because it resulted to low switching
costs. In addition, due to tiers of wine industry and availability of substitutes it shows that there
is large number of providers in the state which gives the buyers a greater power to bargain.  
   
 D. Bargaining Power of Suppliers (HIGH FORCE) 
One of the sections of the Porter’s five forces analyzes how much power and leverage the
supplier of a product has; in exchange it may influence the productivity capacity of the business.
The study reveals that the Philippine coconut wine entering the New York market would be
faced with a strong supplier bargaining power. 
 1. One of the internal factors that shows a high force of supplier's bargaining power is the
current situation of the coconut plantation in New York and in other countries. In the
Philippines there is a seriously damaged in coconut plantation due to the volcanic eruption
of Taal Volcano last January of this year, which is located at Batangas nearby in the province
of Laguna. Therefore, resulting to higher cost of coconuts in the country. 
2. There are also factors that affect the bargaining power of the supplier, one of which is the
fact that coconut fruit is not only used for coconut wine alone, but there are a lot of products
that are also produced using this fruit, i.e. coconut oil, coconut milk, coconut sugar and the
like. Therefore, creating confidence to the suppliers in influencing the cost of coconut. 
3. Another factor that affects the bargaining power of the suppliers is the difficulty in
production of coconut supply. One great example is the pest outbreak that nearly wiped out
the coconut trees across Central Luzon, in 2014. The insect Coconut Scale or widely known
as "Cocolisap" thrived in, infesting more than one million coconut trees (Jadina, 2014). Due
to this difficulty suppliers of coconut might bargain more, which in turn gave them greater
power to influence the price of coconut supply.  
To conclude, given the factors affecting supplier's bargaining power, it is obvious that the
Coconut wine industry will encounter a very high supplier bargaining force. This is because most
of the vast coconut trees plantation within and outside the Philippines are greatly affected by the
natural and human-made calamities, therefore suppliers or owners of the coconut trees
plantation experienced difficulty in producing coconut fruit that might be a big factor which gave
them greater power to bargain. Because of the low number of suppliers, the bargaining power is
high, considering the reasons for exporting the raw materials, it is clear to infer that the above
listed factors are affecting the company’s profitability associated with suppliers bargaining
power. 

E. Threat of New Entrants (MEDIUM FORCE) 

The Threat of New Entrants refers to the impact of new players or new entrants in the
industry. And in the case of the Philippine Coconut Wine business, the analysis shows that it
will encounter a High force of competition associated from the new entrants of the industry.  
1. One of the barriers that creates high competition from new entrants, is the legislation
called the New York Farm Winery Act of 1976, which is a law that enable the small
winners to enter and stimulate growth in the industry by allowing them to sell directly to
consumers, retailers, and restaurants (Miltner, 2017). Due this legislation, a very low
switching cost is given to the consumers therefore allowing them to easily move from one
wine business to another.    
2. In terms of Government economic policies, New York is well known for policies that
allows private organizations like Wine & Grape Foundation to further promote the
marketability of wines in the state (Life in the Finger Lakes, 2015). Therefore, since New
York is good at inviting new entrants in the industry through economic policies, it results to a
greater threat anticipated from the new vintners.   
 3. According to the latest update of Beverage Trade Network, even though there are notable
wine distributors in New York like DeCanto Wines, Soilair and Massanois, there are large
economies of scale in the industry of wine in New York (Beverage Trade Network, 2019).
Hence, creating opportunities for consumers to have wide variety of wine products. In this
case, due to large economies of scale in the industry, it creates higher competition between
and among the new entrants. 
4. In terms of capital requirements according to website of Profitable Venture, in starting a
small-scale winery business in America it will cost about two hundred and fifty thousand
dollars to five hundred thousand dollars ($250,000 to $500,000) with an annual business tax
rate of 8.85% (Vlahos, 2017). In case of smaller entrant in wine business, it would create
higher barriers to them in entering the industry therefore creating low to moderate
competition in the wine industry. 
In conclusion, the analysis in terms of threats of new entrants, shows that there is a high
force of competition for new entrants in the industry of wine in New York. Primarily because of
some legislative orders like the New York Farm Winery Act of 1976, which allows small and
large vintners to easily enter in the business of wine. Also, with respect to government policies
and economies of scale, New York’s industry of wine is allowing a low to moderate barriers for
the new entrants to penetrate in the industry, therefore creating high competition between and
among the entrants. 

III. Conclusion (NOT/LESS PROFITABLE) 

Based on the result of the analysis, the group conclude that establishing a coconut wine
business in New York will not be profitable. This is because in terms of threats of new entrants,
the analysis shows that there would be a medium force of competition for new entrants in New
York’s wine industry. First, because of some legislative orders like the New York Farm Winery
Act of 1976, which allows small and large vintners to easily enter in the business of
wine. Therefore, giving the new entrants the ability to easily penetrate in the market, which
resulted to a higher competition. In addition, with respect to government policies and economies
of scale, New York’s industry of wine is allowing a low to moderate barriers for the new entrants
to enter in the industry, therefore results to a higher competition between and among the
entrants. For the Threat of Substitutes, due to several different alternative drinks, the business
would barely generate profit. Also, with the recent case of poisoning caused by drinking coconut
wine, consumers will have second thoughts whether to buy the product or not primarily because
of safety issues. As for the competitive rivalry in the industry, it would be challenging for the
business to compete with the massive number and size of competitors found in New York,
hence, it will also be difficult for them to generate higher sales. Moreover, the fact that there is a
low switching cost, high availability of substitutes, and large number of providers this affects the
profitability of the business due to having a high force in buyers bargaining power. Lastly, as far
as suppliers' bargaining power is concerned, considering the small amount suppliers and the need
of exporting the raw materials are factors that affects the suppliers bargaining power
which later have impacts to the business’ profitability.  
IV. References: 
Beverage Trade Network. (2019). Top 10 Wine Distributors in New York. Retrieved
from https://beveragetradenetwork.com/en/brands/forty-two-degrees-south-2008-pinot-
noir-579.htm 
Cazentre, D. (2020, January 29). How Big is New York's Wine Business? Inside the
Numbers. Retrieved from https://www.newyorkupstate.com/wine-tours/2020/01/how-big-
is-new-yorks-wine-business-inside-the-numbers.html 
Conway, J. (2019, August 9). U.S. wine market: dollar sales of the leading table wine brands
2019. Retrieved from Statista: https://www.statista.com/statistics/251955/leading-table-
wine-brand-sales-in-the-us/#:~:text=Barefoot%20wine%20was%20the%20top,independent
%20wineries%20in%20the%20nation.   
Dunham, J. & Associates. (2019, November 15). 2019 Economic Impact Study of the New York
Wine & Grape Industries. Retrieved
from https://www.newyorkwines.org/Media/Default/documents/2019%20Economic
%20Impact%20Report%201.15.2020.pdf 
Famiglia Cecchi. (n.d.). Which Factors Determine the Price  of Wine? Retrieved
from https://www.famigliacecchi.it/en/news/which-factors-determine-the-price-of-
wine/190 
Fleming, S. (2020, April 30). Craft Beverage: New York Sourced for Success. Retrieved
from https://esd.ny.gov/industries/craft-beverage 
Hesser, A. (2003, April 09). Why Wine Costs What It Does. Retrieved
from https://www.nytimes.com/2003/04/09/dining/why-wine-costs-what-it-does.html 
Jadina, M. (2014, June 26). Saving the PH Coconut Industry. Retrieved
from https://www.rappler.com/move-ph/issues/hunger/61596-save-ph-coconut-industry-
empower-farmers 
Life in the Finger Lakes, N. (2015, August 20). The New York Wine Industry: Looking Back,
Looking Forward. Retrieved from https://www.lifeinthefingerlakes.com/the-new-york-
wine-industry-looking-back-looking-forward/ 
McKee, L. (2020, January 30). Economic Impact Study of the NY Wine Industry Shows
Significant Growth. Retrieved from https://www.winebusiness.com/news/?go=getArticle 
Mifsud, C. (2018, October 1). Why Beer Is the World’s Most Beloved Drink. Retrieved from
Time: https://time.com/5407072/why-beer-is-most-popular-drink-world/ 
Miltner, K. (2017, October 30). New York's Farm Winery Act Celebrates its 40th Anniversary.
Retrieved from https://www.visitfingerlakes.com/blog/post/happy-anniversary-to-the-new-
york-farm-winery-act-of-1976/ 
New York Wine and Grape Foundation. (2012). Facts on New York Wine Industry: New York
Wine & Grape Foundation. Retrieved from https://www.newyorkwines.org/facts-and-
figures 
New York State Public Health Association. (2014). Sugar-Sweetened Beverage Research and
Policy. Retrieved from New York State Public Health Association: http://nyspha.org/page-
1154330 
Ngo, S. (2017, January 9). Annual Review: 2016 Bar & Restaurant Beverage Program Trends.
Retrieved from Bevspot: https://bevspot.wpengine.com/2017/01/09/2016-in-bar-industry-
trends/ 
Profitable Venture. (2015). How Much It Cost to Start a Winery Business. Retrieved June 24,
2020, from https://www.profitableventure.com/cost-start-a-winery-business/ 
Sim, D., & Watling, E. (2018, September 27). Ranked: The U.S. States That Drink the Most (and
Least) Alcohol. Retrieved from Newsweek: https://www.newsweek.com/ranked-us-states-
drink-most-and-least-alcohol-1140777?slide=15 
Underhill, J. (2015, August 20). The New York Wine Indutsry: Looking Back, Looking Forward.
Retrieved from Life in the Fingerlakes: https://www.lifeinthefingerlakes.com/the-new-
york-wine-industry-looking-back-looking-forward/ 
VinePair. (2017, July 9). What Are Spirits? Retrieved from
VinePair: https://vinepair.com/spirits-101/what-are-spirits/ 
VinePair. (2019, January 8). The States That Drink the Most Wine in America (Maps). Retrieved
from VinePair: https://vinepair.com/articles/states-drink-most-wine-2019-maps/ 
Vlahos, L. (2017, March 27). An Overview  of  the NYC Business Tax Environment. Retrieved
from https://www.taxlawforchb.com/2017/03/an-overview-of-the-nyc-business-tax-
environment/ 
Worldwide Wine Tours. (2008). The History of New York's Wine Industry. Retrieved
from https://www.worldwidewinetours.com/newyork/newyork-wine/